Why Care About Debt Freedom?

In an article at the beginning of the year, Jacob of Early Retirement Extreme asked us what we consider freedom and whether we absorb barriers internally and limit our own freedom. Since those of us who pay off debt often refer to that blessed state of being out from under our debts as “debt freedom,” I began thinking about when and whether I’d be free and how much that mattered.

As Jacob points out, there’s an extent to which we wouldn’t notice even if we weren’t free. Some people live happily without ever leaving their country. In the States there’s an awful lot to see even if you don’t leave. I’d feel restricted, however, because I have relatives in other countries and want to be able to attend my cousin’s wedding in Canada or see my aunt and uncle’s new home in France.

There are other people who feel very restricted by 9-5 jobs. They want to work at these less or not at all. Even though many people find these restrictive, I look forward to working at a particular kind of library job–and while you can have a library on your own, I’d rather work in someone else’s archives so I don’t have to do as much admin work and can focus on the materials. That’s what I want to be free to do. So, in this case, a 9-5 is something I’d like to do for the rest of my life, because it’s my passion.

Is freedom the same for everyone, are we necessarily bound by something?

Yes, I think we’re all bound by something–and I worry about those who aren’t bound to something. We’re bound to the people we love, we’re bound to our passions and the actions we commit to to fulfill them, we’re bound to our goals.

I didn’t move to DC because I like cities, I moved here because I’m in love with someone who’s working/studying here. We didn’t have the same freedom some young couples do, but because I love him and think what he’s doing is good and he loves his work and thinks it’s good, we’re both ok with not being free for now.

Because we both have particular desires of career, we also won’t be free to move just anywhere. We’ll have to move somewhere where either we can both fulfill our main goals or one person can fulfill while one person fulfills other goals. We know that both of us will probably pass up some opportunities that we could take if we were single, but we want to be together more than have these opportunities.

What about debt freedom?

For many, debt is taken on as a trade-off for fulfilling some other goal–like a college education or having a home. The problem with debt is that, unlike living in an area or working a particular job, debt continues to hold us back after we’ve gotten the payoff. Having student loans may mean that someone can’t fulfill the non-profit career he wants until he’s paid them off. Debt is a trade-off that lingers.

That’s why I believe debt freedom is a particularly useful goal. Being free of debt (or of non-mortgage debt), means that you’re free of a long-term trade-off and able to move on. If you have plans and goals and people you love, you’ll never be entirely free to do what you want–and that’s ok, because you want your plans, goals, and people too.

If you’re free of consumer debt and student loans, then you’re able to take lower-paying jobs if that’s what you’re passionate about. You’re able to move to other countries without worrying about funneling money back to the loan payments in the states. You’re free to save up extra money and start your own business. Debt freedom is possibility.

“If you have plans and goals and people you love, youâ€™ll never be entirely free to do what you wantâ€“and thatâ€™s ok, because you want your plans, goals, and people too.”

Yeah, I mean – Welcome to life! Again, that’s a trade-off of what you value more. Some folks would make the opposite decision and choose the freedom over the potential mate.

What is different about debt-freedom is that transcends so many other barriers – young, old, single, married, widowed, divorced…. I always like when Dave Ramsey talks about becoming debt-free – “You know what you can do when you don’t have any payments? (half laughing) Whatever you want!”

So liberating. For us, debt-freedom meant that we could pull up stakes, move cross-country, and move down to a single income. Simply not possible if we were carrying around all those payments.

Being debt free is definitely worth while, though there are good forms of debt to have. Even those “good” forms limit freedom. As far as other freedom… I think you gain freedom in the stability of commitment. If you had your whole life to do whatever because you did not have to work, or could work whenever you want, then you might lose track of the time you do have to enjoy. So in gaining freedom you lose some. It’s all in how you look at it.
.-= her every cent counts´s last blog ..With an HSA Account, When Do You See the Doctor? =-.

Here’s a concrete example of debt freedom. In the early 1970s, the inflation rate was so high that the received wisdom was to buy what you wanted now, even if you went into debt, because whatever it was, it would cost more by the time you saved up enough to buy it. I didn’t accept this advice; my older sister did. Later we both were dissatisfied with our jobs and wanted to go to graduate school. Having no debts, I was able to quit my job and go to graduate school. My sister, having debts, couldn’t. Having debt freedom would have allowed her to go to graduate school.

Now, as it happened, instead of repining, she sought different opportunities in the company she worked for, became a manager, rose to quite a high executive position, and retired early, having enjoyed her job much more than she thought she ever would in the early 1970s.

In sum, though debt freedom allows one to realize dreams more easily, wise responses to the constraints imposed by debt may still result in a life as good or even better than a debt-free life.

Very good post. Proud to say that I am totally debt free. No mortgage, no consumer debt of anykind. I walked out of my job last March and now I am pursuing a new career in consulting/training. I was fed up with corporate politics and I just took a big step. If I had any debt, I would not be able to do this. Living on savings for a while is one thing, paying debt thru savings is another.

Right on! For me I feel trapped because of my debt, yeah I know who’s ultimately responsible. But frankly I’ve been doing a job for 14 years that I’m good at but have absolutely no passion surrounding it. I make a great wage, so until we get to a point where our payments are our own, here I am. But that sweet sweet day is not too far away.
.-= Paul @ FiscalGeek´s last blog ..Principal vs. Prepaying, Our Debt Snowball and How Wachovia Stole $8.03 =-.

Maybe the sister in question never even considered the question of in-debtedness in the same way. Perhaps she made some decisions, also, based on her (first) marriage and her agreement with her husband that she’d put him through graduate school and then he’d do the same for her, although as I recall, they split up about half-way through that deal (his grad school) and then maybe she found that her work was pretty satisfying and becoming more so as each of her jobs within a big company allowed her to develop new skills. And maybe even though she never thought about debt in any structured way she saved money from an early point by just not getting it…paying into an IRA and a tax-deferred savings plan that took it out her paycheck before she’d ever seen it. And since she was too lazy to do more than that, it just sat there, perhaps and is now worth a fair amount, so that although she’d never spent any time doing financial planning, between her savings and her investments in real estate, which probably were more driven by necessity than not, and her increased salary, which increased mildly as she took on bigger jobs (not as much as it would have had she been a man, as she knew from all those salary reviews) and relatively modest living habits (too lazy to go shopping, which she seems to have found uninteresting, except sporadically) meant that in the end she actually ended up with a comfortable life. And except for a mortgage, no debt. So…active planning pays off, and sometimes passive planning does, too, perhaps. Active is more predictable, though. 🙂

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